Norway may Intervene and Buy Krone
Joe Perry March 20, 2020 4:12 AM
Today, the Norges Bank said it would consider intervening and buying the Krone.
Two of the largest moves we have seen over the past 2 weeks have been the strong bid in the US Dollar and the dramatic fall in the price of crude oil. So, what happens to a country ‘s currency (vs the USD) that relies on oil and gas for 40% of its export revenue and 20% of its GDP? It falls 30% in less than 2 weeks!
On March 9th, the day after Saudi Arabia said it would counter Russia’s refusal to cut supply by pumping its own oil as much as possible, the Norwegian Krone stood near 9.2500. Today, less than 2 weeks later, the pair reached a high of 12.1224. Nearly halfway through the move, the Norges Bank held an emergency meeting and cut interest rates from 1.5% to 1.0%. However, this action failed to halt the move higher and it continued this week. Today, the Norges Bank said it would consider intervening in the market and buying the Krone to slow the devaluation. The Norges Bank has not intervened in the market since 1999. The Central Bank also said they would offer loans for up to 12 months to help those affected by the coronavirus. As a result, after putting in today’s highs, USD/NOK retraced on the day and ended up putting in a LARGE shooting star candlestick formation. A shooting star is a one candle formation indicating a possible reversal. Resistance isn’t until today’s highs near 12.1225 and first support isn’t until yesterday’s lows near 10.5000.
Source: Tradingview, City Index
USD/NOK isn’t the only Norwegian Krone pair to reverse today. The result of the Norges Bank comments also had a reversal effect on the EUR/NOK after a 20% run up during the same timeframe. Resistance again is at today’s highs near 13.1492. Horizontal support is near 11.5980, then yesterday’s lows at 11.5072. The pair also put in a huge shooting star formation.
Source: Tradingview, City Index
Note that towards the end of the Crude Oil Futures trading session, US President Trump hinted that the US may intervene and buy oil for the Strategic Petroleum Reserve (SPR). This helped Crude Oil’s rally of 25% today, however most of the move was during the US session, and well after the Norges Bank comments. But this did help reinforce a lower USD/NOK.
Source: Tradingview, NYMEX, City Index
When it comes to trading the Norwegian Krone, there are at least 3 factors we need to pay close attention to:
- The direction and the magnitude of the price of the US Dollar
- The direction and the magnitude of the price of Crude Oil
- Comments from Norges Bank officials
These are all currently driving the price of USD/NOK and EUR/NOK. A change in any one of them could result in a change in direction of the Norwegian Krone.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.